Economic Policy Review
What Market Risk Capital Reporting Tells Us about Bank Risk
September 2003 Volume 9, Number 3
JEL classification: G21, G28

Author: Beverly J. Hirtle

In recent years, financial market supervisors and the financial services industry have increasingly emphasized the role of public disclosure in ensuring the efficient and prudent operation of financial institutions. This article examines the market risk capital figures reported to bank regulators by U.S. bank holding companies with large trading operations to assess the extent to which such disclosure provides market participants with meaningful information about risk. It argues that when one looks across banks, market risk capital figures provide little additional information about the extent of an institution's market risk exposure beyond what is conveyed by simply knowing the relative size of its trading account. In contrast, when one examines individual banks over time, these figures appear to provide information not available from other data in regulatory reports. These findings suggest that market risk capital figures are most useful for tracking changes in individual banks' market risk exposures over time.

HTML executive summary
PDF full articlePDF18 pages / 183 kb
Related New York Fed Content
By continuing to use our site, you agree to our Terms of Use and Privacy Statement. You can learn more about how we use cookies by reviewing our Privacy Statement.   Close